I am new here so also just learning. Here's what I've found:
If you use the "Go Advanced" (as opposed to the "Quick Reply" button to reply to a message, you can attach a pic. The pic won't show on your reply but a link will appear. I use this for pic that are on my computer only.
If you use either style of reply, you can click on the "Insert Image" icon - the little icon that looks like a picture of a mountain and sun. When you do this, it will ask you for the URL of your image. For this, I use photos from my blog, from FaceBook, or from other websites. If you right click on the photo, it will say "copy image URL". You can then go to the pic icon and paste. These pics will then show up in the body of your reply like this: